Cost of Sale Helps Manage Advertising Staff

?Cost of sale? is just as important to managing the profit goals of a Web business as gross margin, which is profit after content and production.

At least in some operations, cost of sale is defined as the sum total of all sales and marketing costs, including staff, commissions, benefits, promotions, research and other related expenses.

There are many variations to the cost structure of a company or operating unit, but one lengthy and profitable experience allowed me to set a target of sales and marketing costs at 30 to 35 percent of revenue.

Just like with content and production costs, when the cost level drops below 30 percent, it was a signal to invest more in sales and marketing, while a cost level above 35 percent raiseed questions about either overinvestment of funds or sales staff falling short of appropriate goals.

So with 30 to 40 percent of expenses going to content and production, and another 30 to 35 percent going to sales and marketing, the remaining 25 to 40 percent goes to administration, technology, taxes, other expenses and finally to net profit. Managing these two important components of cost went a long way toward achieving profits in an extraordinarily high growth environment.

Simple Revenue Metric Helps Set Annual Budgets

One of the challenges of managing a Web site of a traditional media property is how to find a rational way of setting the revenue budget.

The challenge is more acute when an Internet operation has metro dailies, small dailies, weeklies and broadcast sites as part of the total network.

What revenue budgets make sense and how do they differ among the different types of properties? Broadcast sites don?t have traditional classified listings to tap. Weekly site have less competition than dailies, especially major metro dailies. Publishers already are under severe financial pressure and are understandably concerned about the additional burden of contributing to an aggressively increasing online revenue budget. Continue reading “Simple Revenue Metric Helps Set Annual Budgets”

Local Online Video Sales

An online sales manager sent a note asking about getting started in online video sales. The quick answer is, start small.

A previous post pointed out the limited viewership at this time with local online videos. It is important to establish a foothold in video by producing some clips, learning the technology and gaining insight into the audience. But the great majority of video viewership is on national sites such as YouTube, while much smaller viewership is on local media sites.

A local site that is regularly getting more than 100,000 views a month is probably an exception right now. A more common amount of traffic might be in the tens of thousands. Many sites are likely generating less than 10,000 views a month if they are doing video at all.

At a $30 cost per thousand video views (video commands a higher cpm because it is a captive audience), the inventory on a site with 20,000 views a month is worth $600. In contrast, page view inventory is worth $150,000 a month on a site with 5 million PVs a month (5M/1,000 x $10 cpm x three ads per page). In addition, video has a high production cost because it is labor intensive.

A good starting point for sales is just one or two video sponsorships that include the preroll (the ad at the beginning of the video, usually less than 10 seconds long) and a banner position on the pages that display the videos for the sake of added value.

But there is a better answer. Consider starting with a video version of Top Jobs, which is an upsell of employment liner ads into a video format. It has successfully rolled out at quite a few newspapers, has decent advertiser acceptance and can quickly generate six figures of revenue in metro markets. The profit and revenue from this product can finance the growth of video in other areas of the operation.

Sales Staff Incentives

Online sales people need to be more persevering than traditional media AEs because of the extreme peaks and valleys of the business.

Compensation is one way to help them through the valleys and boost their performance even higher during the peaks.

Management should consider two critical questions about a new hire. Is the AE experienced with online sales or not? Will the AE fill a strong existing desk of business, a weak one or a new one? The answers help determine the structure of the compensation for the early months on the job.

A new AE who has to develop a desk of business from scratch needs some kind of financial guarantee to stick with the job during the early months of development. The techniques include salary only, salary with bonus, salary with commission or draw against commission (guaranteed payout, sometimes even if the goals aren?t met).

Most AEs without previous online sales experience seem to need at least six months getting comfortable with client questions and objections. Experienced AEs of course need less.

Managers often believe that salary only is a poor option for any sales person, even when they are given months to settle into a new job. So an introductory phase of high salary and low commission, or salary and commission with draw, are options to consider for inexperienced AEs with weak or new desks. Salary with bonus or salary with commission are good choices for the experienced AE.

Once the desk is running well, other options include straight commission or commission with bonus. These options seem to work best with salespeople who are highly motivated, risk tolerant and willing to work extra hours. But these kinds of salespeople are rare.

Guide to Vendors Specializing in Turnkey Solutions

This guide covers vendors who specialize in providing turnkey solutions for online newspapers — products and services that cover a full array of functions such as content management, advertising delivery and other solutions in one complete package.

Media Span: A full range of integrated print, broadcast and online products.

TownNews: Vendor claims more than 300 newspaper customers ranging in circulation from 900 to 300,000.

First Day Story: specializing in turnkey solutions for community newspapers.

Matchbin: also specializing in turnkey solutions for community newspapers, radio stations, TV stations and clients in other industries.

Dynaportal: More than 40 applications including content management and advertising delivery.

Clickability: Claims more than 400 Web publishers as customers for its on-demand Web publishing products.

Harvest Info: This vendor focuses on providing a full suite of advertising products.

Print2Web: Another well-known industry vendor that focuses on providing a full suite of advertising products.

Kaango: Provides a comprehensive classified platform including transactional capability.

Please use the Contact form through the link on the left to submit other recommended vendors.

Developing Productive Staffs Takes Critical Thinking

Media sales staffs are used to dealing with numbers that track their productivity, such as budgets, pipelines and close ratios. Journalists tend to abhor the idea.

Tracking the productivity of online journalists in a complex, well-managed environment is unavoidable. It?s by tracking the number of articles they manage and the page views they generate that managers can determine if they should hire more staff.

Imagine a site with a content staff of 10 that generates 10 million page views a month or a million PVs per staffer. Let?s assume about 1,000 stories a week ? mostly from the print side but some purely online ? automatically flow onto the site, with the biggest spike on Sundays. Among many duties, the staff produces original content, develops slide shows and is responsible for making sure all stories get on the site, flow into the proper sections, receive additional packaging, etc.

A new annual budget comes along with a 25 percent increase in revenue. Can ad rates go up 25 percent? Unlikely in this environment, but a rate increase can solve part of it. Can 25 percent more ad positions be created? Unlikely again, for most sites already have fleshed out their ad space. Other ideas are possible, but the obvious one is a major boost in page views, which will increase ad inventory at the same rate.

Let?s settle on a 20 percent increase in page views. You probably can?t make your content staff work 20 percent harder or put in six days a week. If you are convinced that they are fully productive, then the rational choice is a 20 percent increase in staff or two more full-time people in order to achieve the new PV target.

Those two new hires won?t join the others in checking the story flow. They must be focused on creating new content, sections and applications that will be major factors in boosting the site that extra 20 percent.

Tracking content staff productivity and developing well-defined job descriptions linked to those goals will go far in building a balanced and fairly managed online operation.

Continuous News Takes Continuous Practice

Managing staff that has covered mass murders, hurricanes, major riots and other major news events is educational about what it means to do continuous online news.

When a story that big breaks, sites immediately get pounded with traffic. People have heard only headlines about the story on TV and radio. They want details, as many as they can get, and they want them immediately.

TV station sites tend to be faster with updates but lighter on details. Newspapers are slower with updates but heavier on details. Both of these responses are typical for their respective cultures and approaches to content management. Continue reading “Continuous News Takes Continuous Practice”